TRF Ltd has called off a merger with Tata Steel two days before a court convened meeting of shareholders was scheduled to approve the scheme of amalgamation.

The board of TRF, where the promoter Tata Steel holds a 34.11 per cent stake, on February 6 decided not to proceed with the merger citing improvement in business performance witnessed in the last few quarters.

In concurrence with the decision of TRF Limited, the Tata Steel board also decided to withdraw the scheme, which was announced on September 22, 2022 as part of a wider consolidation of nine group companies.

As a result, the meeting of TRF shareholders, as convened by the National Company Law Tribunal, on Thursday is now rendered infructuous.

The TRF stock jumped 20 per cent after the announcement hit the market, and remained locked in the upper circuit through the entire trading session. It closed the day at a 52-week high of Rs 328.4 on BSE, up by Rs 54.7 a share.

According to the share swap formula prescribed before, TRF shareholders were to get 17 shares of TSL of face value of Re 1 for every 10 shares of TRF having a face value of Rs 10.

Remote e-voting on the resolutions to support the amalgamation had started on January 29 and it was to end on Wednesday. However, the board decided to call off the merger a day before the voting closure.

“Over the last few quarters, the company has seen an improvement in business performance owing to ongoing significant support from Tata Steel in the form of placement of order(s) and infusion of capital coupled with the company’s efforts on enhanced debtor collections and, cost and asset optimisation,” TRF informed the bourses.

The board called off the merger in the light of its business performance.

In FY2023, TRF recorded a net profit of Rs 87.76 crore on a revenue of Rs 177.10 crore. In Q2FY24, the Jamshedpur-based company posted a profit of Rs 16.48 crore on a revenue of Rs 39.27 crore.

In contrast, the company, which is in the business of bulk material handling, design and engineering and technical services, had suffered a loss of Rs 20.34 crore in FY22 and Rs 67.96 in FY21.

This is not the first instance when Tata Steel has reversed a merger decision.

It had previously called off a merger with Tata Metaliks in 2016 citing inordinate delays in getting regulatory approvals.

Group simplification

While Tata Steel reversed its decision on TRF, it managed to achieve a significant milestone in simplifying the India business by merging five subsidiaries, including three listed companies — Tata Steel Long Products Ltd, Tinplate Company of India Ltd and Tata Metaliks Ltd with itself, as part of the restructuring announced in September 2022.

Put together, these five companies, which also include unlisted Tata Steel Mining Ltd and S&T Mining Company Ltd, have a cumulative turnover of Rs 19,700 crore.

Moreover, it is hopeful of merging three more companies — Bhubaneswar Power Private Ltd, Angul Energy Ltd and The Indian Steel and Wire Products Ltd — within Q1FY25.

In a letter to the stock exchanges, Tata Steel said the mergers in record time present a unique opportunity for consolidation of the downstream operations.

“This will enable growth in value-added segments by leveraging Tata Steel’s nationwide marketing and sales network.

The amalgamation is value-accretive and will also drive synergies through raw material security, centralised procurement, optimisation of inventories, reduced logistics costs, and better facility utilisation,” it added.

The company reminded that TRF successfully navigated a highly challenging business environment with the support of Tata Steel, which vowed to continue with its simplification journey going forward.